Kentucky’s Lopsided Recovery

Job growth in Kentucky has picked up over the last year, and every county saw a decline in its unemployment rate from March 2014 to March 2015. However, a closer look shows that the economic recovery is not spread evenly across the state, but is concentrated in a minority of counties in more prosperous parts of Kentucky.

Only 28 of the state’s 120 counties have more people employed in March 2015 than in March 2007, before the recession hit. As the map below shows, those counties where the growth in residents employed has been strongest are mostly clustered in central and northern Kentucky. Big job gains (in both percentage growth and raw job numbers) are in counties like Scott, Oldham, Woodford, Jessamine and Campbell, along with the large counties Fayette and Jefferson.

In contrast, 24 counties have at least 20 percent fewer people employed than in 2007, many of them in eastern and northeastern Kentucky. Pike and Boyd counties both have over 4,000 fewer people employed.

To view a larger version of the map, click here.

While Kentucky’s overall economy is showing improvement, the recovery is not being felt equally by different regions of the state. The more-populated areas close to major transportation networks have seen job growth in sectors like health care and education, a rebound in the auto industry and resurgence in industries like transportation and logistics. Rural Kentucky, meanwhile, falls farther behind as traditional industries like coal and marginal branch plant manufacturing have declined and not been replaced.

We need continued growth in the overall economy to pull those counties further up. And we need to invest in targeted strategies to create new jobs in rural areas—through SOAR and other efforts and by embracing ideas like the Power+ Plan—or Kentucky’s geographic divides will continue to widen.

‘Right to Work’ is Wrong for Kentucky

“‘Right to Work’ is Wrong for Kentucky”

By Greg Stumbo, Special to the Courier-Journal

GC Fiscal Court Denies Right to Work Ordinance

Right to Work, Right or Wrong?

Kentucky’s Undocumented Immigrants’ Tax Contributions Would Increase Under Reform

Undocumented immigrants living and paying taxes in Kentucky would increase their contributions under the Obama administration’s executive actions, according to a new study by the Institute on Taxation and Economic Policy (ITEP). Such payments would increase even more under comprehensive immigration reform.

ITEP’s study, “Undocumented Immigrants’ State and Local Tax Contributions,” estimates that 48,000 undocumented immigrants in Kentucky currently pay $39 million annually in state and local taxes. As many as 20,000 Kentucky immigrants eligible to benefit from President Obama’s 2012 and 2014 executive actions are expected to pay $6 million more once the measures are fully in place. Granting lawful permanent residence to all immigrants in the state would increase those contributions by an estimated $17 million.

“Like all people living and working in Kentucky, undocumented immigrants pay sales and excise taxes when they purchase items ranging from clothing to gasoline. They pay property taxes as homeowners and renters. Many also pay state income taxes,” said Anna Baumann, research and policy associate at the Kentucky Center for Economic Policy. “Reform would increase those contributions by providing legal channels for full compliance and by increasing immigrants’ income-earning potential.”

President Obama’s 2012 and 2014 executive actions grant temporary immigration relief status to youth who have resided in the country for at least five years and parents of U.S. citizens or legal residents. Currently, the 2014 action is caught up in legal challenges and oral arguments are expected to be heard on April 17 in the 5th Circuit Court of Appeals.

Nationwide, undocumented immigrants contribute about $11.8 billion in taxes. This would go up by about $845 million under the Obama administration’s executive actions and would increase by $2.2 billion under comprehensive reform.

The benefits of immigration reform aren’t limited to the tax system: The Council of Economic Advisers (CEA) and the Center for American Progress (CAP) both estimate the president’s executive actions will have positive effects on labor market growth and productivity, as well as wages and economic growth. The CEA estimates that the executive actions would increase national GDP by 0.4 percent over 10 years, while having no impact on the likelihood of employment for U.S.-born workers.

To view ITEP’s full report with state-specific data, click here.

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The Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan research organization that works on federal, state, and local tax policy issues. ITEP’s mission is to ensure that elected officials, the media, and the general public have access to accurate, timely, and straightforward information that allows them to understand the effects of current and proposed tax policies. ITEP’s work focuses particularly on issues of tax fairness and sustainability. ITEP works directly with lawmakers, non-governmental organizations, the public, and the media to achieve these goals.

Kentucky Would Gain Little from Estate Tax Repeal

What the Research Says about “Right to Work” Laws

The effort to promote “right to work” laws with local governments in Kentucky is founded on claims about job and economic growth that are unsupported by the research, according to a new report by the Kentucky Center for Economic Policy.

The report looks at the most careful previous studies on RTW that show the law is not associated with an increase in jobs, but with lower wages and benefits for all workers.

“Research comparing the experience of right-to-work and non-right-to-work states is clear that the law isn’t about what’s good for workers,” KCEP policy analyst Anna Baumann said. “These laws don’t create new jobs—whether it’s in manufacturing or other business sectors—and they undermine unions’ ability to fight for workers.”

The KCEP report highlights several studies on RTW, noting the following:

  •  The Economic Policy Institute (EPI) found “right to work” laws had no impact on employment growth and manufacturing jobs in Oklahoma after it adopted RTW in 2001.
  •  Wages and benefits are worse in RTW states and Kentucky wages are already low. All workers in RTW states, union and non-union, make about $1,500 less per year than in non-RTW states.
  • A University of Kentucky study says a lack of education and innovation, not business climate and right to work, is what’s holding the state back.

Additionally, the report points out that if RTW were an important factor in decisions about manufacturing business locations and expansions, one would expect to see RTW states returning more quickly to their pre-recession employment levels. But Kentucky is already outpacing neighboring RTW states Tennessee and Virginia by that measure.

So far, 12 counties have approved misguided local RTW laws. As the research shows, such laws are only hurting workers, not giving them more employment opportunities.

“As Kentucky continues to pull out of a recession, it’s important state and local leaders don’t pass policies that hurt workers more,” Baumann said. “Proponents tend to offer right-to-work as a fix for Kentucky’s problems, but it’s the equivalent of hitting a nail with a screwdriver. It just doesn’t work.”

To view the full report click here.

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What the Research Says about “Right-to-Work” Laws, Employment and Wages

As several Kentucky counties have passed or are considering local “right to work” (RTW) laws, serious research calls the benefits of such laws into question. The best evidence suggests that RTW fails to result in stronger job growth including in manufacturing while resulting in lower wages and benefits for workers in RTW states.

RTW

RTW laws prohibit unions and employers from including a provision in contracts that requires employees who benefit from union representation to pay their fair share toward those costs. In becoming RTW, Kentucky counties including Warren, Todd and Boone are the first local governments in the nation to join the 25 states with RTW laws, including most recently Indiana and Michigan in 2012 and Wisconsin in 2015. Despite its name, RTW does not increase or enhance access to jobs, nor does it ban forced union membership, as such is already illegal under federal law.

Proponents are making bold claims about the potential of RTW to boost Kentucky’s economy, in particular that it will grow manufacturing jobs as existing companies expand and new ones locate here. But studies that use careful statistical techniques to analyze the experience of states do not support claims of the economic benefits of these laws, while pointing out potential harm to workers in terms of job quality.

What the Research Says about “Right-to-Work” Laws

April 15 Isn’t Popular, But Taxes Still Important

Few people like Tax Day. Filling out forms and mailing off checks doesn’t usually inspire reflection on the bigger purpose of taxes.

Yet most people can agree on the priorities our tax dollars pay for. With them — and through our local, state and federal governments — we invest in good schools and universities, well-kept roads and bridges, social services for vulnerable children and adults, safe and beautiful communities and other public structures essential for shared prosperity in the Commonwealth.

In other words, taxes are a critical tool for doing important things together that we cannot do alone. Here in Kentucky, state tax dollars go for:

Education: Early childhood education and child care; K-12 education; higher education; adult education; worker training; vocational education; libraries; public television.

Health Care: Health insurance for people with disabilities, pregnant women, low-income children and parents, and the elderly in nursing homes through Medicaid; public health; mental health services; disability services; substance abuse services.

Human Services and Supports: Child and domestic violence protection; foster care and adoption; housing; nutrition assistance; support for low-income families; support for veterans; support for the elderly.

Infrastructure: Roads; water and sewer systems; public transit.

Environmental Protection: Land conservation; enforcement of laws protecting land, air and water; state parks; forest protection and management.

Public Safety and Justice: Court system; public defenders and prosecutors; state police; jails and prisons; disaster relief; consumer and worker safety protection.

Economic and Community Development: Small business development; tourism; job development; agricultural development; arts and culture.

Kentucky is projected to collect about $9.8 billion in revenue in its General Fund in 2015. Fourty-one percent of the General Fund is expected to come from the individual income tax; 32 percent from the sales tax; six percent from the property tax; seven percent from corporate taxes and the remaining from the coal severance tax, cigarette tax, lottery and other sources.

For 2015-2016, General Fund resources are allocated as follows:

state spending 2015

Source: Office of the State Budget Director

For a closer look at how our state tax dollars get appropriated to different budget areas, click here. And to see where federal tax dollars go, click here.

Unfortunately, those seeking to shrink or eliminate many of these investments capitalize on our distaste for tax forms and payments by telling us we’d be better off with more tax cuts. But that would starve the very public systems and structures we need for a strong workforce and economy — often through policy choices that let wealthy individuals and businesses off the hook while shifting responsibility for public investments onto the middle class and poor Kentuckians. Furthermore, we know individual and corporate income tax cuts aren’t the way to a stronger economy and more jobs.

What we actually need is tax reform to fix our eroding tax base and restore investments in the things that make us truly competitive like good schools and healthy workers. The state currently faces a $14 billion unfunded liability in the teachers’ retirement system. SEEK, the state’s main funding formula for P-12 schools, is still 10 percent lower per pupil than it was in 2008, once inflation is accounted for. And many other public needs go unfilled after 14 rounds of budget cuts totaling $1.7 billion since 2008.

Bad news aside for another day, the important takeaway on Tax Day is that tax dollars pay for investments that benefit all Kentuckians.

Kentucky a Loser in Proposed Tax Giveaway to Wealthiest

The U. S. House of Representatives is expected to vote this week to repeal the federal estate tax, an idea that would worsen growing inequality and reduce revenue needed for investments that move our economy forward. As a poor state, Kentucky is an especially big loser in this proposal.

Contrary to the impression given by those clamoring for repeal, only the wealthiest 0.2 percent of estates face the estate tax. Kentucky is expected to have only about 40 estates owing the tax in 2016, or 0.7 percent of taxable estates nationwide. In contrast, our state makes up 1.4 percent of the U. S. population, meaning Kentuckians are deeply under-represented in the super-rich group that would gain from estate tax repeal.

At the same time, Kentucky is over-represented in our reliance on federal dollars to strengthen our economy and invest in our people and communities. Kentucky receives about $6,496 per person annually in federal aid to individuals, ranging from Medicare and Social Security to Pell Grants and unemployment benefits. That’s eighth-highest among the states and 15 percent more than the U. S. average of $5,662. And like all states federal money comes to Kentucky every year for areas like infrastructure, education, research and economic development that support commerce and improve quality of life.

estate tax

Eliminating the tax would cost $269 billion in reduced tax revenues over the next decade. And repeal would provide a tax cut of over $3 million on average to the estates that will benefit, with the country’s richest 316 estates—worth at least $50 million—getting a tax giveaway averaging more than $20 million apiece.

Repeal would also deepen soaring wealth inequality. The wealthiest 1 percent of U. S. families have 42 percent of all wealth. Inheritances make up 40 percent of all household wealth and skew heavily to the very top. The estate tax serves as a backstop to the income tax, ensuring that prosperous individuals who hold significant wealth in unrealized capital gains pay some tax on their earnings that they wouldn’t otherwise pay if they held those assets until death. More than half of the wealth of large estates is in the form of unrealized capital gains.

Getting rid of the estate tax would be on top of actions starting in the early 2000s to raise the threshold of wealth needed to be eligible for the tax and cut the rate. The share of Kentucky estates owing estate tax has fallen from 1.5 percent in 2000 to just 0.1 percent in 2012. The estate tax is now a very modest tax applying to a shrinking number of very large estates, with an average effective rate of only 16.6 percent.

We need a tax system that fairly generates the revenues for investments that make our economy stronger and our communities better. Estate tax repeal is a step in the opposite direction.